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NAB shares fall after Santander denies interest

Glenda Kwek

Spanish banking group Santander is denying reports it is contemplating a bid for the National Australia Bank's Clydesdale and Yorkshire banks, with the companies shares trimming yesterday's gains in early trade.

A spokeswoman for Santander told BusinessDay that they would not comment or make a statement on the news reports, but she confirmed that Santander UK had denied it was in talks to buy NAB's underperforming British banks.

On Monday, Ana Patricia Botin, the chief executive of Santander UK, declined to comment on the bank's rumoured interest in Clydesdale and Yorkshire, but did say the bank was focused on organic growth.

Nomura banking analyst Victor German said regardless of whether the assets are sold, there remained a "fundamental value" in NAB.

He said that as the UK assets were non-core for NAB, selling them would be appropriate for the Australian bank if there was a reasonable price offered.

"I think the amount of time that management has to divert into [the UK assets] and also the resources that have to go into managing this business are probably not worth the upside," Mr German said.

"I think if they’re able to sell it at a reasonable price, it’s the right thing to do, even though from a longer term perspective, maybe there is some value in the franchise."

NAB shares lost as much as 0.75 per cent, or 20 cents, to $26.65, when trade resumed today. Yesterday, NAB stocks closed 50 cents higher, or 1.9 per cent, at $26.85 on an otherwise quiet trading day.

A report in London's Sunday Times triggered speculation that Santander wanted to bolster its British business before a planned listing in London, estimated at about £10 billion.

On Sunday, it was reported that Santander was considering a £2 billion ($3 billion) bid for NAB's banks, which mostly operate in northern England and Scotland.

The speculation had been greeted with scepticism by analysts. But they added that any deal would have been positive for NAB.

Last year, NAB was plagued by falling earnings, a weak share price and millions of dollars in losses from its under-pressure UK business.

At its annual meeting in December, about 21 per cent of its shareholders voted against the bank’s remuneration report, reflecting frustration with NAB’s series of negative surprises.

NAB had cut 1400 jobs in the UK, closed branches and exited commercial property loans as the British economy struggled.